Wednesday, January 9, 2013

Brief Discussion of the Three Developmental Phases of Modern Chinese Gold and Silver Coins

By: Caijincaiyin

Translator's Note: This is part of a post discussing the 30 years of development of modern Chinese gold and silver coins. The author claims that there are three phases of development: 1979 to 1996, 1997 to 2008, and 2009 to now. I can detect the author's preference for colored coins from the second and third phases, but on the other hand, collectors outside China mostly collect coins from the first phase, the "old, exquisite and rare" types. The discussion on the first phase does offer good background information on the first days of modern Chinese coins. This is what  I have translated.

Author’s Note: As collectibles and work of art with limited mintage, gold and silver coins are undoubtedly endowed with the property of investment and value appreciation. How to select investment targets with better appreciation potential? The collector needs to form a forward looking perspective. Understanding and mastering the developmental history and features of modern Chinese gold and silver coins is the prerequisite to forming this forward looking perspective. I will briefly discuss my personal views, for reference by readers.

2011 marked the 33rd year of the development of modern Chinese gold and silver coins. Up to now, the People’s Bank of China issued ten series, close to 2000 types of coins made from gold, silver and other precious metals. These commemorative coins have rich themes, innovative designs, great workmanship, with strong national characteristics and unique artistic styles. They have earned high reputation in the international numismatic community. Modern Chinese gold and silver coins basically went through and are still going through the following three phrases to achieve today’s success:

Phase I (1979—1996): Export for foreign exchange, with panda coins making their name abroad.

The 3rd plenary session of the 11th Party Congress established the ideological policy of “Seek Truth from Facts”, and made the great strategic decision to reform and open up. The People’s Bank of China carried out in earnest the message of the 3rd plenary session of the 11th Party Congress, took up its due responsibility, and planned to issue gold coins in exchange for foreign exchange for China. Under the international and domestic conditions at that time, precious metals like gold and silver were not allowed to be exported directly for foreign currencies for the benefit of the country, but they could be made into precious metal coins to supply international markets. At the same time, designs on the coins could be utilized to publicize and promote Chinese culture overseas. In consideration of all these, the People’s Bank of China started planning on gold coin minting.

As early as in June, 1976, the Printing Bureau of the People’s Bank of China designated the production of gold and silver commemorative coins as a research project with high priority. The vision was to focus on the research of the technical aspects of design, engraving, and die manufacturing for gold and silver commemorative coins. The motivation was to catch up with the latest international development, and mint gold and silver coin products that were unique, exquisite, artistic and elegant. Design themes were also researched and finalized. In June, 1978, the Printing Bureau organized a seminar on the trial minting of commemorative coins. Topics studied and discussed included the plan for trial production of commemorative coins and design patterns in draft forms. Product quality criteria were established. Both the technical staff and artistic designers took an active part in the preparations, overcoming various barriers, thus laying a solid foundation for large scale production in 1979.

In October, 1979, the State Council formally approved the People’s Bank of China’s document “Request for Instructions for Improving the Management of Overseas Sales of Gold and Silver Coins/Medals by Our Country”, and authorized the People’s Bank of China as the sole organization for issuing gold and silver coins on behalf of the country. The design, production and release of gold and silver coins fell under the responsibility of the People’s Bank of China. At the same time, the State Council also approved the request by the People’s Bank of China to issue the four piece set of commemorative gold coins for the 30th anniversary of the founding of the PRC. This was the first set of modern precious metal commemorative coins issued by our country, and also the first modern gold coin set sold overseas (to Hong Kong) during the period from the founding of the new China to the first days of Reform and Open Up. They were well received by international markets.

Analysis of the social and historical conditions at that time shows that world economy was developing at a rapid pace, and that science and technology were making ever greater progress. On the other hand, our country had just started to reform and open up. Productivity was relatively low, and much remained to be done to build the country. In terms of living standards, people barely had enough to eat and wear. Statistics showed that China’s domestic GDP was 364.5 billion Yuan in 1978. The average disposable income among urban residents was 343 Yuan per capita. Net income among farmers was merely 134 Yuan per capita. During this historical period, the major endeavor was to accelerate economic development, narrow the gap between China and other countries, and raise living standards for the populace. In order to achieve rapid economic development, advanced technology and equipment had to be purchased and introduced from abroad, which could not be accomplished without foreign exchange. It goes without saying that all the trades and industries, and all the provinces and municipalities in China focused on export for foreign exchange and promotion of foreign investment, with the purpose of accumulating technology and capital for self development.

The People’s Bank of China took up its share of responsibility, and played an active role in the push for export for foreign exchange. One of the means was to produce gold and silver coins for export to earn foreign exchange. During this historical period, production decisions were partly based on orders from foreign distributors. The production and sales of gold and silver coins were characterized by the following features:

1.    The sole purpose was to earn foreign exchange. Types, quantity and time of production of gold and silver coins were partly determined by orders from foreign distributors. The production and sales during this period can be summarized as “You place the order, and as long as you pay in foreign currencies, I will produce them for you upon approval.” As target customers were foreign investors and collectors in Hong Kong, Macau, Taiwan, Japan and the United States, the coins were characterized by distinctive features of that time, for example Unearthed Artifacts, Ancient Inventions and Discoveries, paintings from Qi Baishi and Xu Beihong, as well as human figures and Chinese zodiac such as Sun Yat-Sen, Zheng Chenggong and the lunar animals. There were also Unicorns for the US market (see Picture 1), and the Three Kingdoms gold and silver coins for export to the Japanese market. The gold and silver coins produced during this period of time were not unlike the export chinaware from Jingdezhen, as commodities for export in exchange for foreign currency, with some flavor of artwork.

 Picture 1, 1995 1/2oz gold Unicorn (designed to meet the aesthetic taste of foreign collectors)

2.    COAs were overlooked or not available. With the focus on export for foreign exchange, COAs for gold and silver coins from this period of time were overlooked or unavailable, in line with the customs of foreign collectors. Some early COAs were even printed by foreign distributors. During this phase, COAs were mostly used as descriptions.

3.    The release mintage was often different from the actual mintage. Due to market conditions and business risks of distributors and retailers, orders were very unstable. Distributors might ask for restrikes for sale, or even melt some coins. This led to the frequent delta between the official release mintage and the actual mintage.

4.    Supply control and pricing power. As the production and sales were oriented to foreign investors and collectors, those who controlled the supply of gold and silver coins also had the pricing power. Because the pricing power was in the hands of foreign distributors, two common terms gradually became popular: “old, exquisite and rare”, and “graded coins”. In contrast to the quantities available abroad, the domestic gold and silver coin supply was undoubtedly “rare.” As for “graded coins”, our panda gold and silver coins, for example, have different designs every year, with no repetitions. On the other hand, the American gold and silver eagles with the largest sales volume in the world have had the same designs for decades. To add to the fun of collection, and for easy transactions, the concept of “graded coins” was made up in an effort to distinguish the difference among the same types of coins in huge quantities and their pricing, based on human-defined criteria of conditions. (See Pictures 2 and 3.)

Picture 2, Design of Chinese panda gold and silver coins, which changes every year

Picture 3, Design of American silver eagle, with no changes over time except for the Year mark

5.    It was extremely difficult for domestic investors and collectors to obtain these gold and silver coins. The export- and foreign exchange-oriented production and sales model, the money nature of gold and silver, the openness of foreign trade, lack of wealth of the common folks…these conditions all made it difficult for domestic investors and collectors in their collecting activities. Ge Zukang once said, “Before 1994, precious metal coins were not for sale in China. I had to purchase gold and silver coins from overseas coin dealers. The Customs had many regulations and rules on purchasing precious metal coins abroad. To buy gold and silver metals from overseas, faxes had to be sent, written in Traditional Chinese characters. I sent many faxes, without succeeding in getting even a single coin. I ended up asking friends to buy them for me overseas. It is believed that this counted as smuggling at that time.”

6.    Panda coins made their name abroad. The five characteristics discussed above show that modern gold and silver coins from China in that historical period faced challenges from all directions. However, those who worked in gold coin production never gave up their pursuit and ambition for breakthroughs. Under the adverse conditions, they managed to forge the “international business card” – Chinese gold and silver panda coins (one of the internationally renowned investment coins) through self expression, bold innovations, intensive deliberation and insistence on perfection. Panda coins have become the life-long pride of Chinese coin makers of this historical period. In an international coin competition held in the United States in 1985, the panda gold coin from China (from the year 1983) won the “Best Gold Coin” award. The American Newsweek published an article, calling this set of gold coins “full of charm, attracting a lot of passionate admirers”.

 Designs of 1982 and 1983 gold panda coins, where the artistic technique of “creating a raised part with a sunken surface” is utilized

Superstructures are built on economic foundations. The development of humans and things is limited by specific historical circumstances. Gold and silver coins are no exceptions. Modern Chinese gold and silver coins braved the difficult times and even made some breakthroughs through hard work by the coin makers, accomplishing their mission for this historical period, and ushering in the second phase of their development.

No comments:

Post a Comment